Lion Announces Unaudited Full Year 2020 Financial Results

Rhea-AI Summary

Lion Group Holding Ltd. (NASDAQ: LGHL) reported a 44.8% decline in total revenues for 2020, falling to $10.2 million from $18.5 million, primarily due to the impacts of COVID-19. The company experienced a net loss of $3.4 million, down from a net income of $8.2 million in 2019. Despite challenges, the number of revenue-generating client accounts grew by 23.8%. The firm anticipates a 260%-300% revenue increase in 2021, projecting earnings between $37 million and $41.7 million.

Positive

• Total revenue-generating client accounts increased by 23.8% to 5,010.
• Launched TRS trading services, expanding offerings for international investors.
• Anticipated revenue growth of 260%-300% in 2021, projecting $37-$41.7 million.

Negative

• Total revenues decreased by 44.8% to $10.2 million.
• Net loss of $3.4 million compared to a net income of $8.2 million in 2019.
• CFD trading volume decreased by 72.3% to 223,018 lots.

HONG KONG, March 30, 2021 /PRNewswire/ -- Lion Group Holding Ltd. ("Lion" or "the Company") (NASDAQ: LGHL), operator of an all-in-one trading platform that offers a wide spectrum of products and services with a focus on Chinese investors, today announced its unaudited financial results for the full year ended December 31, 2020.

FINANCIAL AND OPERATING HIGHLIGHTS
All comparisons are made on a year-over-year ("yoy") basis.

For the Full Year Ended December 31, 2020

• Total revenues decreased by 44.8% to $10.2 million from $18.5 million, mainly due to the negative impact of COVID-19.
• Net loss was $3.4 million, compared to a net income of $8.2 million last year.
• Non-GAAP net income was $0.3 million, compared to a Non-GAAP net income of $8.2 million last year.
• Total number of revenue-generating client accounts increased by 23.8% to 5,010 from 4,047 last year. 
• Total revenue-generating CFD (contract for difference) client trading accounts increased by 44.8% to 2,668 from 1,843 last year.
• CFD trading volume decreased by 72.3% to 223,018 lots from 806,111 lots last year.
• Futures brokerage trading volume decreased by 19.0% to 738,444 lots from 911,693 lots last year.

Mr. Chunning (Wilson) Wang, CEO of Lion, commented: "Similar to other companies, our various business segments were adversely affected by the COVID-19 pandemic. Our financial performance is subject to changing global market conditions, particularly the fluctuation and volatility of trading activities on major exchanges worldwide, which resulted in decreases in revenue and margins for Lion this year. Despite these challenges, we made efforts to remain competitive in the industry, largely attributable to our diverse new products and service offerings. For example, we launched our TRS trading services to allow international investors to invest in the Chinese stock market. We are planning to launch a fintech business through the prospective acquisition of Lion Fintech, which holds a proprietary trading license for crypto assets in Dubai. At the same time, we recently sponsored two SPAC companies and hope to realize gains from the appreciation of founder shares upon each SPAC's initial public offering."

"While we expect our CFD trading services to continue being a major revenue source in the near future, we cooperated with Yun Tian Investment Limited, which has dispatched a team of talent in the areas of finance, technology, and marketing, to further advance our development in the TRS trading business. We are also pleased that Mr. Guandong (Gordon) Wang, who has nearly 10 years of experience in quantitative trading, has joined our Board and is expected to play a key role in our TRS trading business."

"As we head into the new year, we remain confident in our long-term strategies and ongoing developments. We expect businesses will return to normal in June this year once large populations have received the vaccine. In addition, the need for new products and services will further increase as our client base diversifies. As such, we will continue to monitor the situation and develop new products and services to keep up with customer demands and industry trends."

RECENT DEVELOPMENTS/BUSINESS HIGHLIGHTS

• Launch of TRS trading business

On July 16, 2020, Lion announced the official launch of "Lion Lu Gu Tong," its total return swap (TRS) service that offers A-shares (shares that are denominated in Renminbi and traded on the Shanghai Stock Exchange and Shenzhen Stock Exchange) and Hong Kong stock basket-linked TRS. Lion earns income from the spread on interest rate loans provided to TRS trading customers and loans borrowed from our business partners, in addition to receiving commissions and fees from customers for trades made through the TRS trading service. Leveraging Lion's advanced technology infrastructure, the new service provides a fast, smooth, and economical channel that facilitates the purchase of Chinese stocks by international investors.

     - TRS is growing steadily and may become a new core driver

Lion's TRS trading business is currently growing steadily. In terms of financial support, Lion is raising $10 million in a private placement with Yun Tian Investment Limited ("Yun Tian") through a group of reputable and wealthy private entrepreneurs from South China. Lion expects to use the proceeds from the private placement to develop its TRS trading business, among other business segments, in which the parties will co-operate with each other. In addition to financing, Yun Tian offers professional expertise and industry experience to advance the Company's development in TRS trading business.

     - Lion appoints new director to Board of Directors

In January 2021, Lion appointed Mr. Guandong (Gordon) Wang as a director of the Board of Directors. Mr. Wang has approximately 14 years of financial industry experience and approximately 10 years of quantitative trading and technology-related experience. Mr. Wang's diverse background and ample experience will be valuable in playing a key role to develop Lion's TRS trading business and provide insights in developing innovative products to serve the needs of our customers.

     - Trend in cross-border investment

Cross-border investment has become more and more popular, which continues to benefit the business of cross-border internet brokerages. Recently, the Northbound funds have seen good performance, and Lu Gang Tong trading is expected to increase quickly. Lion intends to leverage its competitive advantage as one of the few cross-border internet brokerages that offer TRS trading services to Chinese investors.

• Sponsoring SPAC companies as a new business line

In March 2021, the Company launched the sponsorship of two SPAC companies in cooperation with other parties. Currently, the SPAC companies are in the formation stage. The Company intends to build a professional SPAC sponsorship team, evolve, and develop SPAC sponsorship into a key business segment with plans to sponsor at least one more SPAC by the end of 2021. The Company expects to derive gains from the appreciation of founder shares upon each SPAC's initial public offering and derive gains or losses from further appreciation or depreciation of founder shares following each SPAC's merger transaction, at the cost of the sponsor's risk investment. The Company expects to bring in new talent with SPAC experience to help advance this business segment in 2021.

• Strategic partnership with Grandshores, planning to enter into blockchain industry

In January 2021, Lion engaged Mr. Yao Yongjie, chairman of Grandshores Technology Group Limited ("Grandshores") (HKEX: 01647), as the chief technical adviser to provide blockchain technology support, advice on operations, and consulting services in operating digital asset trading platforms. Shortly after, Lion signed a framework partnership agreement with Grandshores. In March 2021, Lion subscribed 64,500,000 shares of Grandshores at a total subscription price of approximately $3.5 million as its first investment into the blockchain field. In cooperation with Grandshores, Lion plans to expand into the blockchain industry, including, but not limited to, investment in cryptocurrency mining, investment in private blockchain technology companies, and issuance of mainstream digital currency trust funds.

• Significant capital flows from mainland China to overseas, opportunities for our CFD trading and securities brokerage businesses

Since the beginning of 2020, hundreds of billions of capital from mainland China flowed southward and outside of China, boosting Hong Kong and U.S. financial markets. As a result of the positive impact of the Hong Kong financial market, online-brokerage companies led the market in terms of growth, suggesting that the market is gradually tapping into the Company's value. Recently, Lion has taken the lead in launching its TRS trading service, which complements existing southbound trading in the market.

• Completed financing transactions provide the capital base for future business plans

Lion has completed a couple of private placement transactions since the end of 2020 and acquired sufficient funds to support its upcoming business expansions. See "Liquidity" below.

• Expansion into Vietnam, the first step of strategic expansion into Southeast Asia region

Lion introduced a Vietnamese-language version of its CFD trading platform, Lion Brokers Pro, in October 2020. The Company currently has a team in place in Ho Chi Minh City to support the expansion and will engage local enterprises as part of its promotion and marketing efforts. In addition to Vietnam, Lion intends to target Singapore and Thailand in the next tranche of its strategic plan to expand into Southeast Asia. The Company established a subsidiary and office in Singapore earlier in 2019 and applied for a Capital Markets Services license with the Monetary Authority of Singapore. Approval is expected in the first half of 2021.

FINANCIAL RESULTS

For the Full Year ended December 31, 2020

Revenues

Total revenues decreased by 44.8% yoy to $10.2 million for the year ended December 31, 2020, from $18.5 million for the year ended December 31, 2019, primarily due to: (i) a decrease in market marking commission income; (ii) a decrease in futures and securities brokerage income; and (iii) a decrease in insurance brokerage income, slightly offset by an increase in trading profits.

• CFD Trading and Other Services Income. Market making commission income decreased by 45.2% yoy to US$7.0 million from US$12.8 million in the prior year. The decrease was primarily due to a decrease in CFD trading volume, mainly attributable to the economic and financial impact brought onto customers by COVID-19, which resulted in a decrease in their willingness to trade and make investments, as well as their disposable income allocated to making such transactions. Furthermore, customer concerns about future unpredictability also caused a decline in their trading activity, which affected the Company's CFD trading business in particular. Specifically, a small number of key clients, from whom Lion derived a substantial portion of CFD trading service income, traded significantly less in 2020 compared to the prior year. In addition, travel restrictions in Hong Kong caused cancellations and prevented management from attending branding, business promotion, and exhibition activities, thereby limiting the Company's opportunities to acquire new customers.
• Insurance Brokerage Income. Revenues generated from insurance brokerage services decreased by 63.8% yoy to US$0.9 million from US$2.6 million in the prior year, primarily due to travel restrictions to Hong Kong stemming from the COVID-19 outbreak and the unstable political environment in Hong Kong, which dissuaded the Company's Chinese clients from purchasing insurance products in Hong Kong.
• Futures and Securities Brokerage Income. Revenues generated from futures and securities brokerage services decreased by 8.4% yoy to US$2.0 million from US$2.2 million in the prior year, primarily due to a decrease of US$0.4 million in futures brokerage commission income. This resulted from a decrease in the number of executed futures contracts from 911,693 lots in 2019 to 738,444 lots in 2020, brought on by the economic and financial challenges stemming from COVID-19, partially offset by government subsidy income of US$0.2 million.
• Others. Revenues generated from others were US$0.2 million in 2020, compared to US$0.8 million in the prior year. The decrease in revenue was primarily attributable to the decrease in interest income as the Company earned an interest spread on a bridge loan of US$19.1 million facilitated by Lion to unrelated third parties in 2019.

	Year ended December 31,
	2020			2019
	US$		%	US$		%
CFD trading and other services	7,034,447		68.7	12,843,574		69.3
Insurance brokerage services	959,299		9.3	2,648,141		14.3
Futures and securities brokerage services	2,029,669		19.9	2,215,867		12.0
Others	206,720		2.1	819,268		4.4
Total	10,230,135		100.0	18,526,850		100.0

Operating expenses

Total operating expenses increased by 32.6% yoy to $13.6 million from US$10.2 million in the prior year, primarily due to increases in G&A expenses, compensation expenses, communication and technology, professional fees, marketing expenses, and service expenses, partially offset by a decrease in commission expenses and interest expenses.

• Commission Expenses decreased by 45.0% yoy to $1.8 million from $3.4 million in the prior year, primarily due to a decrease in insurance brokerage commission expenses and futures and securities brokerage commission expenses, which is in line with the overall decrease of the Company's insurance brokerage business and futures and securities brokerage services.
• Compensation Expenses increased by 56.5% yoy to $3.8 million from $2.4 million in the prior year period, primarily due to share-based compensation granted, growing number of employees in line with the Company's business growth, as well as the increase in average compensation.
• Communication and Technology Expenses increased by 76.6% yoy to $1.4 million from $0.8 million in the prior year, primarily due to an increase in trading systems service fees and market data fees, which was in line with the growth of the Company's CFD trading services and the launch of its TRS trading services.
• General and Administrative Expenses increased by 226.9% yoy to $2.3 million from $0.7 million in the prior year, primarily as a result of share-based compensation granted in 2020 and charged into general and administrative expenses.
• Professional Fees increased by 105.7% yoy to $1.6 million from $0.8 million in the prior year, primarily due to the legal and consulting services fees additionally incurred after Lion became a public company in 2020.
• Services Fees for independent contractors and consultants increased by 116.7% to $0.8 million from $0.4 million in the prior year period, as a result of an increased number of contracted service providers needed, attributable to the growth of the Company's business and share-based compensation granted to service providers.
• Interest Expenses decreased by 75.0% yoy to $0.2 million from $0.7 million in the prior year, primarily attributable to the Company's short-term borrowings and a bridge loan facilitated to unrelated third parties by Lion in 2019.
• Occupancy Expenses increased by 15.4% yoy to $0.7 million from $0.6 million in the prior year, primarily due to the new office spaces the Company rented for its subsidiary in Singapore, partially offset by the rental reduction for its subsidiaries in Hong Kong as a result of COVID-19.
• Marketing Expenses increased to $0.7 million from $55 thousand, mainly due to marketing expenses incurred to promote the Company's businesses and branding activities in connection with its listing event, as well as share-based compensation granted to marketing consultants. The Company expects this growth trend will continue in 2021.
• Other Expenses decreased by 29.1% yoy to $0.3 million from $0.4 million in the prior year, mainly due to a decrease in payment service fees, which is in line with customers' reduced trading activities.

Net (loss) income

Net loss was $3.4 million for the year of 2020, as compared to a net income of $8.2 million in 2019.

Net (loss) income per ADS

Diluted net loss per ADS was $0.33 in 2020, as compared to a diluted net income per ADS of $1.16 in 2019.

Non-GAAP Financial Results

Non-GAAP net income, which excludes stock-based compensation expenses and amortization of debt discounts, was $0.3 million for the year of 2020, as compared to non-GAAP net income of $8.2 million in 2019. Non-GAAP net income per ADS – diluted was US$0.03, as compared to a non-GAAP net income per ADS – diluted of US$1.16 in 2019.

Liquidity

As of December 31, 2020, the Company's cash and restricted cash were $3.4 million (excluding $1.4 million of restricted cash), compared to $6.4 million (excluding $2.2 million of restricted cash), as of December 31, 2019. Net cash provided by operating activities was $0.1 million. Net cash used in investing activities was $6.6 million. Net cash provided by financing activities was $2.6 million.

Subsequently, the Company received proceeds of an aggregate US$28.9 million in exchange for the issuance of 15.0 million ADSs as a result of investors' exercise of warrants. In addition, the Company also received US$6.44 million in consideration of the issuance of Series A Convertible Preferred Shares along with February 2021 Warrants.

BUSINESS OUTLOOK

Based on current market and operating conditions, the Company anticipates that all its businesses will recover from COVID-19 in June 2021. Revenue is expected to grow by 260% to 300% to reach between $37.0 million and $41.7 million for the full year 2021. This forecast reflects the Company's current and preliminary views, which is subject to change, including any potential future impact of the COVID-19 pandemic, the effects of which are difficult to analyze and predict.

Non-GAAP Financial Measures

This press release includes reconciliations of the most comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the U.S. ("GAAP") to non-GAAP financial measures. The Company's calculation of Non-GAAP (loss) income (net loss or income before stock-based compensation and amortization of debt discounts) and Non-GAAP EPS differs from EPS based on net (loss) income because it does not include stock-based compensation and amortization of debt discounts, which are non-cash charges. The Company believes that these measures help the management identify underlying trends in the Company's business that could otherwise be distorted by the effect of certain expenses that the Company includes in net loss. The Company believes that these measures provide useful information about its operating results, enhance the overall understanding of its past performance and future prospects, and allow for greater comparability with respect to key metrics used by its management in its financial and operational decision-making.

For more information on the non-GAAP financial measures, please see the table captioned "Unaudited Reconciliations of Non-GAAP and GAAP Financial Results" set forth at the end of this press release.

About Lion

Lion Group Holding Ltd. (NASDAQ: LGHL) operates an all-in-one trading platform that offers a wide spectrum of products and services with a focus on Chinese investors. Through its state-of-the-art technology, Lion offers contract-for-difference (CFD) trading, total return swap (TRS) trading, insurance brokerage, futures brokerage, and securities brokerage on its platform, which can be accessed through applications available on the iOS, Android, Windows, and macOS systems. Lion's customers are predominantly well-educated and affluent Chinese individual investors residing both inside and outside the PRC as well as institutional clients in Hong Kong. Additional information may be found at http://ir.liongrouphl.com.

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, Lion's actual results may differ from their expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company, and the industry in which it operates. Words such as "expect," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believes," "predicts," "potential," "might" and "continues," and similar expressions are intended to identify such forward-looking statements. Lion cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Lion does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based, subject to applicable law. Investors and potential investors should consult all of the information set forth herein and should also refer to the risk factors set forth in LGHL's Annual Report on Form 20-F to be filed in March 2021, and other reports filed or to be filed from time-to-time with the Securities and Exchange Commission.

CONTACTS

Lion Group Holding
Tel: +852 2820 9011
Email: ir@liongrouphl.com

ICR, LLC
William Zima
Tel: +1 203 682 8233
Email: ir@liongrouphl.com

 

LION GROUP HOLDING LTD UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (in dollar amount)
							For the Years Ended December 31,
							2020		2019
Revenues
	Insurance brokerage commissions						$       959,299		$  2,648,119
	Futures and securities brokerage commissions						1,890,502		2,210,915
	Market making commissions and fees						4,940,623		11,056,431
	Trading gains (losses)						1,833,875		1,782,750
	Interest and other						605,836		828,635
							10,230,135		18,526,850
Expenses
	Commissions and fees						1,845,994		3,355,205
	Compensation and benefits						3,802,793		2,430,636
	Occupancy						683,160		591,936
	Communication and technology						1,454,050		823,433
	General and administrative						2,264,318		692,648
	Professional fees						1,565,834		761,238
	Services fees						833,864		384,840
	Interest						183,157		731,812
	Depreciation						40,556		52,852
	Marketing						651,324		55,378
	Payment service charge						245,030		355,585
	Other operating						11,464		10,463
							13,581,544		10,246,026
(Loss)income before income taxes							(3,351,409)		8,280,824
Income tax expense							(1,316)		(64,472)
Net (loss) income							$   (3,352,725)		$  8,216,352
Other comprehensive (loss) income
Foreign currency translation adjustment							20,487		75,637
Comprehensive (loss) income							$   (3,332,238)		$  8,291,989
(Loss) earnings per share for both Class A and Class B
- basic and diluted (i)							$            (0.33)		$           1.16
Weighted average Class A ordinary shares outstanding
- basic and diluted (i)							6,180,795		3,140,388
Weighted average Class B ordinary shares outstanding
- basic and diluted (i)							3,962,294		3,949,993
(i)	Share and per share data have been retroactively restated to give effect to the reverse recapitalization

 

LION GROUP HOLDING LTD UNAUDITED CONSOLIDATED BALANCE SHEETS (in dollar amount)
							December 31,		December 31,
							2020		2019
Assets
	Cash and cash equivalents						$      3,426,467		$      6,388,978
	Restricted cash-bank balances held on behalf of customers						1,367,630		2,192,201
	Securities owned, at fair value						17,622		180,201
	Derivatives assets						-		194,110
	Receivables from broker-dealers and clearing organizations						8,089,193		1,684,961
	Commissions receivable						71,253		88,560
	Short-term loans receivable						2,239,378		1,637,310
	Other receivables						724,708		166,064
	Prepaids, deposits and other						677,978		510,291
	Total current assets						16,614,229		13,042,676
	Fixed assets, net						34,919		73,688
	Intangible assets						86,728		67,964
	Other assets						6,169,065		233,343
	Deferred taxes						1,128		677
	Total Assets						$    22,906,069		$    13,418,348
Liabilities and Stockholders' Equity
Liabilities
Current Liabilities
	Payables to customers						$      5,221,270		$      3,853,693
	Payables to broker-dealers and clearing organizations						3,845,740		-
	Commissions payable						39,180		29,439
	Accrued expenses and other payables						1,763,094		417,445
	Short-term borrowings						293,905		1,412,570
	Short-term borrowings from related party						-		128,415
	Derivative liabilities						5,653		-
	Due to director						149,522		-
	Dividends payable						-		385,901
	Total current liabilities						11,318,364		6,227,463
	Convertible debenture						816,006		-
	Total Liabilities						12,134,370		6,227,463
Commitments and Contingencies
Stockholders' Equity
	Preferred shares, $.0001 par value, 50,000,000 shares authorized,
	none issued and outstanding as of December 31, 2020 and 2019, respectively						$                  -		$                  -
	Class A ordinary shares, $0.0001 par value, 300,000,000 shares
	authorized, 9,627,553 and 3,140,388 shares issued and outstanding
	at December 31, 2020 and 2019, respectively (i)						963		314
	Class B ordinary shares, $0.0001 par value, 150,000,000 shares
	authorized, 9,843,096 and 3,949,993 shares issued and outstanding
	at December 31, 2020 and 2019, respectively (i)						984		395
	Additional paid in capital  (i)						14,516,848		7,605,034
	Accumulated deficit						(3,729,628)		(376,903)
	Accumulated other comprehensive losses						(17,468)		(37,955)
	Total Stockholders' Equity						10,771,699		7,190,885
	Total Liabilities and Stockholders' equity						$    22,906,069		$    13,418,348
(i)	Par value of ordinary shares, additional paid-in capital and share data have been retroactively restated to give effect to the reverse recapitalization.

 

LION GROUP HOLDING LTD UNAUDITED SUMMARY OF CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS DATA (in dollar amount)
	For the Years Ended December 31,
	2020	2019
Net cash provided by operating activities	$        105,675	$  7,976,995
Net cash used in investing activities	(6,549,514)	(27,254,283)
Net cash provided by financing activities	2,640,316	20,664,343
Effect of exchange rate changes on cash	16,441	85,966
Net increase (decrease) in cash	(3,787,082)	1,473,021
Cash and restricted cash at beginning of year	8,581,179	7,108,158
Cash and restricted cash at end of year	$     4,794,097	$  8,581,179

 

LION GROUP HOLDING LTD UNAUDITED RECONCILIATIONS OF NON-GAAP AND GAAP FINANCIAL RESULTS (in dollar amount)
		Year ended December 31,
		2020		2019
		US$		US$
Net (loss) income		(3,352,725)		8,216,352
Stock-based compensation		3,656,800		-
Amortization of debt discounts		13,288		-
Non-GAAP (loss) income before stock-based compensation and amortization of debt discounts		317,363		8,216,352
(Loss) earnings per share for both Class A and Class B
- basic and diluted (i)		0.03		1.16
Weighted average Class A ordinary shares outstanding
- basic and diluted (i)		6,180,795		3,140,388
Weighted average Class B ordinary shares outstanding
- basic and diluted (i)		3,962,294		3,949,993
(i) Share and per share data have been retroactively restated to give effect to the reverse recapitalization

 

		Year ended December 31,
		2020				2019
		Basic		Fully Diluted		Basic		Fully Diluted
(Loss) earnings per share for both Class A and Class B		(0.33)		(0.33)		1.16		1.16
Stock-based compensation		0.36		0.36		-		-
Amortization of debt discounts		0.00		0.00		-		-
Non-GAAP (loss) earnings per share for both Class A and Class B (before stock-based compensation and amortization of debt discounts)		0.03		0.03		1.16		1.16

 

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SOURCE Lion Group Holding Ltd.